Wal-Mart bid for Massmart approved, boycott looms

Wal-Mart plans to increase premiums of its Preferred Rx Plan by 23 percent to $18.50 per month Photo: REUTERS

South African retailer Massmart's shareholders have accepted a takeover by U.S. group Wal-Mart, setting up the world's largest retailer for a potential battle with local unions.

Massmart shareholders met on Monday to vote on the $2.3 billion offer. More than 97 percent of those present approved the deal, bringing total shareholder approval to nearly 79 percent, according to chairman Mark Lamberti.

COSATU, South Africa's largest labour federation, threatened the mother of all boycotts in opposition to the deal.

While Wal-Mart has long tussled with organised labour in the United States, unions wield enormous power over South African politics and the economy.

If the deal goes through, COSATU will do what it does best. We will organise the mother of all boycotts against Massmart, COSATU's first deputy president, Tyotyo James, told shareholders immediately before the vote.

Wal-Mart has said it will honour Massmart's agreements with unions and that South African management would be retained.

Analysts have said keeping local expertise would be critical to avoid a bruising fight with unions. COSATU is in a governing alliance with the ruling ANC and wields enormous power.

The union can muster support for the boycott but if they they sustain the industrial action, I think that's a little bit over the top, Syd Vianello, analyst at Nedcor Securities.

Massmart runs some of the cheapest stores so even if they can get some support in the beginning, I think common sense will prevail over some fundamental issues.

The South African Commercial, Catering and Allied Workers Union (SACCAWU), a COSATU affiliate, has formed an Anti-Walmart Coalition that plans to ask South Africa's competition watchdog to block the deal or attach tough conditions.

The coalition wants to keep existing labour and supplier agreements, among other things.